Reetz Corporation Would Like to Determine the Relative Profitability of the Company's

question 24

Multiple Choice

Reetz Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions.For illustration,the company has provided the following data for product A25H: $\begin{array}{llcc} \text {Selling price...................................................... } &\$58.00 \\ \text { Variable cost per unit....................................... } &\$46.40\\ \text {Amount of the constrained resource required by one unit...... } &\text { 2 grams}\\ \text { Monthly unit sales............................................. } &\text { 4,100 units }\\\end{array}$

What is the profitability index for product A25H?

• A)$47,560
• B)$29.00 per gram
• C)$5.80 per gram
• D)0.20

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Definitions:

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Owner's Equity, balancing the total value of resources with the sources of those resources.

Net Loss

The amount by which total expenses exceed total revenues in a specific period, indicating a negative financial performance.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the ownership interest of the business owners.

Expenses

Costs incurred by a business in the process of earning revenue.